Black Swan Events: Planning for Supply Chain Resiliency

Major supply chain disruptions, commonly referred to as "Black Swan" events, are high-impact, low-likelihood occurrences that are typically not on your everyday radar. But knowing exactly where your product is in the supply chain is never more important than during these instances.

The effects of a hurricane, flood, fluctuating oil prices, political unrest, and port closures can all be lessened by enhancing supply chain visibility with industry standards that enable a more fluid and communicative business environment.

Supply chain standards allow for a common language to identify, capture, and share product, location, and event-based information in real time. Standards enable supply chain visibility, a valuable asset when an unexpected event occurs. Companies are better able to recover if they can pinpoint where products are at all times, and can communicate more efficiently with trading partners if all procedures are uniform.

The Need for Visibility

Seventy percent of small and mid-sized businesses responding to a recent Zurich and the Business Continuity Institute survey lack visibility over their entire supply chain. And, 74 percent of companies worldwide suffered a supplier-related disruption in the past year, while 14 percent experienced losses of more than $1.1 million each as a result, the study reports.

A lack of visibility causes stress for the entire retail supply chain—manufacturers, suppliers, brand owners, retailers, e-tailers—and negatively impacts the customer experience.

A crisis situation further exacerbates this effect. For example, the West Coast port slowdown forced some shippers to incur more than three times their usual cost of transporting goods. To mitigate disruption, a number of retailers shifted shipments to East Coast ports, or bought extra inventory in advance. Customers in California, Oregon, and Washington grew accustomed to empty store shelves.

When Black Swan events such as a port slowdown occur, a standards-based supply chain is clearly advantageous. What causes financial losses from supply chain disruptions is the process of having to quickly scramble to find alternative plans. A flexible supply chain operation, which can make changes to suit consumer needs, can recover faster and with fewer costs.

Today’s supply chain management teams must focus on achieving the agility needed to create resilient supply chains—which are not only an effective risk management tool, but also valuable beyond a crisis.

Staying Nimble

Adopting standards to enhance visibility helps create a nimble supply chain that expands a company’s capabilities to meet the needs of today’s omni-channel consumer, and adapt to a rapidly changing business environment driven by the growth of e-commerce.

Companies that leverage the interoperability of standards—as opposed to siloed, proprietary systems—to identify, capture, and share information about a product, benefit from overall operational efficiency and real-time visibility.

In today’s hyper-connected and instant-gratification-oriented culture, time and knowledge are two of our most precious commodities. A standards-based supply chain can provide an organization with the speed and accuracy required when they’re needed most—helping to manage risk during normal operations and at times of crisis.

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